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Top U.S. Senate Democrats Pledge Unity on Obama Tax Plan

Photographer: J. Scott Applewhite/AP Photo

Senate Majority Leader Harry Reid of Nev. on the fight over extending tax cuts following a political strategy session on July 10, 2012. Close

Senate Majority Leader Harry Reid of Nev. on the fight over extending tax cuts... Read More

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Photographer: J. Scott Applewhite/AP Photo

Senate Majority Leader Harry Reid of Nev. on the fight over extending tax cuts following a political strategy session on July 10, 2012.

U.S. Senate Democratic leaders say their members will support President Barack Obama’s latest push to extend most of the Bush-era tax cuts, brushing aside talk of dissension in their ranks.

Senate Majority Leader Harry Reid has pledged to schedule a vote soon on Obama’s plan to extend the tax cuts for families earning up to $250,000 a year while letting them expire for those making more than that threshold.

Republicans want to extend the tax cuts for all income levels for one year beyond their Dec. 31 expiration. They plan to offer their proposal as an amendment to a small-business tax credit measure the Senate is considering this week.

Reid and Max Baucus, chairman of the Senate’s tax-writing Finance Committee, dismissed suggestions that some Democrats may cause problems for Obama’s plan by insisting instead on a proposal by Senator Charles Schumer of New York to extend the tax cuts for families with income up to $1 million.

“Oh, we’ll work that out,” Baucus said yesterday in an interview in Washington. “That’s background noise.”

Baucus, a Montana Democrat, said he agreed with the case Obama made this week to keep most of the tax cuts first enacted in 2001 and 2003.

Any opposition by Democratic lawmakers, including those from states such as New York and New Jersey where a greater share of taxpayers would be affected by Obama’s threshold, may complicate the party’s efforts to emphasize differences with congressional Republicans and presidential candidate Mitt Romney before the Nov. 6 election.

Income Levels

In December 2010, three current Senate Democrats -- Joe Manchin of West Virginia, Ben Nelson of Nebraska and Jim Webb of Virginia -- voted against letting the tax cuts expire for families earning more than $250,000 a year, as did Connecticut’s Joe Lieberman, an independent who caucuses with Democrats.

That same month, Obama agreed with congressional Republicans to extend the tax cuts for all income levels for two years.

Minority Leader Mitch McConnell, a Kentucky Republican, today sought consent to schedule two votes as part of the debate on the small business bill: one on Obama’s tax plan and the other on the Republican proposal to extend all of the tax cuts. “The Senate should make it clear which policy it supports,” he said.

Reid objected, saying he didn’t want to divert attention from the small business measure.

Widespread Support

Reid, a Nevada Democrat, told reporters yesterday that the chamber will vote on Obama’s plan “as soon as we can,” and predicted widespread support.

“We have a pretty clear position in our caucus,” Reid said. “Generally everybody agrees that we should do everything we can to protect the 98 percent and recognize that this, what we’re doing, will help greatly toward the debt that we have, the deficits that have.”

U.S Treasury Secretary Timothy Geithner met yesterday with Senate Democrats during a closed-door lunch to make the case for Obama’s tax proposal.

“I think the vast majority of people are comfortable with $250,000,” Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said afterward.

Geithner made the argument that Obama’s approach helps create a more “balanced” package of revenue combined with spending cuts than a $1 million threshold would yield, Conrad said.

Election Year

Still, Republicans say some Democrats may balk at supporting a tax increase for high earners in an election year.

“When Democrats look at the facts in their particular state, they get nervous about voting for something just on political grounds, when there are a lot of people in their own state who can be hurt by it,” Arizona Senator Jon Kyl, the Senate’s second-ranking Republican, said in an interview.

Republicans say they welcome a debate over taxes, adding that their position would be most helpful to small businesses.

“We’re perfectly happy and anxious to have the debate about the appropriate tax policy,” McConnell told reporters. He added that a one-year full extension would reassure “the markets and the American people that they’re not going to get hit with a whopping tax increase at the beginning of the year” while giving Congress breathing room to tackle a tax code overhaul.

Reid wouldn’t say whether he would allow a vote on the Republican proposal, saying only that senators would work through proposals on an “amendment by amendment” basis.

Capital Investment

The Senate voted 80-14 yesterday, with 60 votes required, to advance the Democrats’ $28.5 billion small business proposal, S. 2237, which would extend write-offs for capital investment and give a 10 percent tax credit to companies that add workers to their payrolls.

House Republicans’ proposal, H.R. 9, which passed in that chamber in April, would provide a tax deduction of as much as 20 percent to businesses with fewer than 500 employees.

The Republican-controlled House plans to vote later this month on legislation to extend the Bush tax cuts for all income levels for a year and begin a process that would lead to a more comprehensive tax-code overhaul in 2013. That bill isn’t expected to advance in the Senate, where Democrats have a majority.

’Hostage’ Charge

Reid accused Republicans of “holding tax cuts for 98 percent of Americans hostage in order to exact even bigger tax giveaways to the top 2 percent.”

If Congress doesn’t act, the tax cuts passed during former President George W. Bush’s first term and extended by Obama and Congress in 2010 would expire at the end of this year. The top tax rate for ordinary income would increase to 39.6 percent from 35 percent. The top rate on capital gains would increase to 23.8 percent from 15 percent, and dividends would be taxed as ordinary income.

A one-year extension of the tax cuts for all income groups would reduce projected federal revenue by $426 billion, and tax cuts for those above the $250,000 threshold make up $68 billion of that total, according to an analysis by the nonpartisan Joint Committee on Taxation that was provided to Senate Finance Committee Republicans.

To contact the reporter on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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